Charitable Gift Annuity
A gift of cash, marketable securities in cash, or marketable securities in exchange for a guaranteed annuity or series of payments. Payments are fixed for the lifetime of the annuitant(s) and are unaffected by stock market fluctuations or economic trends.
What are some benefits of charitable gift annuities?
Gift annuities are an excellent way to increase cash flow. They are also very useful for providing immediate or deferred income payments for a spouse, child or other individual.
Gift annuities are especially appealing to retired donors willing to make a gift to Oxfam America and desiring to receive an income stream with guaranteed payments at rates that may exceed what they are receiving from CD's or other investments.
Gift annuities give donors an immediate charitable income tax deduction in the year of the gift, plus up to five carryover years. A portion of each annuity payment is tax-free.
Generally, no legal costs are incurred by donors for document preparation since the agreement with Oxfam America is both simple and brief whether the gift is large or small (but donors are encouraged to seek review by an attorney).
What are some details and tax issues regarding charitable gift annuities?
The income tax charitable deduction is based on IRS tables for calculating the gift portion of the assets transferred to Oxfam America.
The donor's cost basis and capital gain, if any, is allocated between the gift portion and the annuity portion. A portion of the donor's basis is returned tax-free to the annuitant.
Any capital gain may be spread out over the annuitant's lifetime if the donor is the sole annuitant or the donor and a survivor are the annuitants (provided the annuity is not assignable to third parties other than Oxfam America).
The annuity payments are taxed by allocating the donor's basis and any capital gain over the annuitant's lifetime and treating the balance of the annuity payment as ordinary income.
The Oxfam America obligation to make annuity payments may not be secured by specific assets. Rather, it is an unsecured contractual obligation backed by all the assets of Oxfam America.
Assets transferred to create a gift annuity for the donor and surviving spouse should qualify for the gift tax marital deduction and avoid estate taxation as well. However, there may be gift or estate tax considerations if the donor designates a non-spouse as the sole or surviving annuitant.
Contact our gift planning specialist for more information.